Banks' credit ratings hold steady in Colombia

Banks' credit ratings hold steady in Colombia

Capital Markets Colombia Andean United States Coronavirus

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Fitch Ratings affirmed on Thursday the local long-term and short-term ratings of four major financial firms in Colombia, despite rising risks to the banking sector caused by the spread of the coronavirus.

Local lenders Bancolombia, Davivienda and Banco de Occidente, along with the Colombian division of Spanish bank BBVA and the insurance firm Grupo Bolívar, all maintained their AAA(col) long-term ratings on the local scale.

The four banks have adequate liquidity, but they are likely to see profits fall and loan portfolios deteriorate in the wake of the coronavirus crisis, Fitch said, adding that their capitalization ranges from weak (Bancolombia) to adequate (Banco de Occidente and Davivienda) and robust (BBVA).

"Banks in Colombia are conservative," said Andrés Márquez, senior director of Latin American financial institutions at Fitch. "Also, the banks and the regulator are relatively undisturbed because in 2021 the country will be under the Basel III regulation, which will cause their capitalization indexes to improve."

Fitch downgraded the foreign-currency ratings for the major banks in Colombia after it cut the sovereign issuer to BBB- from BBB on April 1.